The pound sterling is currently the most volatile currency and traders’ efforts were rewarded once again: As expected in yesterday’s analysis, some of the GBP’s recent losses have been corrected due to an oversold situation. Consequently, our long-entry has proved to be successful, providing traders a nice profit on Monday. The pound rejected the 1.4330-level and dropped back below 1.42. Given the fact that the ‘Leave’ Campaign gains ground against the ‘Remain’ before next week’s referendum, traders should generally expect further losses in the GBP. A next lower target could be at 1.40, whereas corrections might be limited until 1.4260. U.K. Consumer Prices are scheduled for release at 8:30 UTC and even if the report comes in with an uptick in CPI, the pound is likely to remain under pressure.
The euro tested the 1.13-barrier and held steady around that level amidst uncertainties surrounding the Brexit vote and the Federal Reserve’s rate decision. With no major important economic reports scheduled for release from the Eurozone, the euro is expected to fluctuate within smaller trading ranges. The focus will rather be on the U.S. dollar and important U.S. data such as Retail Sales due at 12:30 UTC. Retail Sales are expected to show a slower growth in May and this expectation could weigh on the dollar before the report is due for release.
We currently see a higher likelihood for upcoming bullish momentum, driving the EUR/USD towards 1.1390. A crucial resistance level is seen at 1.1330/40 which must be significantly breached to the upside in order to reinvigorate fresh bullish potential. If the euro is unable to break above 1.1305 we will shift our focus to the 1.1270-level. Below that level we expect the euro to fall towards 1.1240 and 1.1215.
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